Finance: Deposit guarantee scheme parameters questioned

Question from the floor: Hindsight is 20/20 when it comes to why the National Government did not further constrain investment in finance companies protected by the Crown's retail deposit guarantee scheme, Dunedin North National party candidate Michael Woodhouse says.

Mr Woodhouse was responding to a question posed by Dunedin resident Ewen Kerstens about why, when the National Government made the decision to guarantee certain banks and finance companies under the scheme, which was set up by the Labour Government and extended by the Government, it did not also guarantee the investments those institutes had made up to that point.

Mr Woodhouse said $8 billion had been lost by people in failed finance companies and the Labour Government was not prepared to let that continue.

Although the scheme was subject to a roll-over, year on year, it was never subject to any constraints on deposits because that would have caused a run on those finance companies, Mr Woodhouse said.

"It's almost a case - and I don't mean to be critical in saying this - that there is a little bit of wisdom after the event when the question is asked why the Government didn't constrain further the amount of investment in those finance companies.

"But even Labour at the time had the opportunity, but didn't do so."